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Roland Berger: Potential in after-sale business in engineering sector

Jan 07
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Roland Berger: Potential in after-sale business in engineering...

There is vast potential in the after-sales business in the engineered products and plant engineering sectors, according to a new study from Roland Berger.

Around 65 per cent of profits come from the after-sales services and the survey suggests innovate services are now in demand. 

The survey revealed that traditional services, such as providing spare parts and maintenance, are in decline, whereas the demand for innovative services, like analytical tools, performance-boosting programs and advisory services, are on the rise.

To counteract this trend, Roland Berger suggests that engineered product and plant manufacturers should rethink their business models and develop new services.

Companies in which the after-sale business makes up at least a third of total sales can chalk up earnings before interest and tax (EBIT) margins of over ten per cent in this area.

Ralph Lässig, partner at Roland Berger Strategy Consultants, said: "The problem is that some 40 per cent of companies haven't yet reached their intended share of sales in services.

"This means many firms are missing out on considerable profit potential – both in industrialized countries and emerging markets."

One key element of growth is remote monitoring, which is the wireless transmission of data from the installed equipment to the manufacturer. Mr Lässig believes that this technology will enable the remote diagnosis of faults and ensure problems are resolved quickly.

He added that the intelligent analysis of customer data helps engineering firms to optimise their equipment and understand customers' unique needs.

Currently, 80 per cent of plant manufacturers receive important information about the usage of the machinery installed, but few can analyse this data to offer their customers added value.

Roland Berger also believe that technology, price, application and efficiency leaders would all benefit from improved after-sales services.

Mr Lässig concludes: "Engineered product and plant manufacturers that can identify the right after-sales model for them and develop a suitable strategy will be able to leverage previously untapped profit potential in the next few years.

"Smaller companies should consider strategic alliances to save money and resources.”

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